HH: Joined now by former Arkansas Governor, former presidential candidate, and now Fox News host, Governor Mike Huckabee. Welcome back to the program, Governor.

MH: Thank you, Hugh, good to be back.

HH: Well, thank you for joining us. As you heard me say in the intro, I’m trying to talk…Governor Mark Sanford’s going to join me next hour. I’m going to try and find all the Republican governor, because you guys have actually run things, and ask you what you think about this stimulus package. So that’s a wide open invitation, Governor. Swing away.

MH: Hugh, it’s the stupidest thing I’ve ever seen government propose. I was against the TARP plan, and even when some of the Republicans went to the podium, wringing their hands and saying well, we don’t like it but we’ve just got to do it, no, we don’t have to do it. You never have to do what’s wrong. And it’s wrong for the government to try to pick the winners and losers in the marketplace. And what’s really crazy about this one, this is not going to stimulate the economy. It’s simply going to spend a whole lot more money, it’s going to indebt our children, and it’s really pretty simple. If you get in trouble because you spend too much money, and you run up a credit way beyond your limit, then how on God’s Earth is it supposed to be the way to fix it to spend more money and run up an even greater credit limit? It’s like a kid going to college his first semester, he has money that his parents give him to last through the semester, and they give him a credit card for emergency, and in the first month, he spends every dime, maxes out the credit card, calls his dad. And how many dads would say oh well, son, that’s great, let me just send you some more money and another credit card?

HH: Now Governor Huckabee, the counterargument is that boy, these are tough times. Arlen Specter made this argument, I wouldn’t vote for this except we’ve got to do something. How do you respond to Arlen and the other proponents of it’s really a difficult, unique time, we have to print the money?

MH: Well, let’s talk about this idea that we’ve got to do something. Okay, something is one thing, but the wrong thing is like saying the Titanic just struck the iceberg. Quick, let’s pump more water into the hull of the ship. Maybe that’ll float her. I mean, that’s what’s wrong, is that you cannot fix this by going the opposite direction of what needs to happen. And if they’re going to do anything, then what makes more sense is to put money in the hands of consumers. And the best way to do that is to ease off on the tax burden. And with the amount of money that’s being committed right now in Congress, the American public could be given a year’s tax holiday – no taxes for a year. And I guarantee you, that would do more to stimulate the economy if businesses and individuals didn’t have to pay taxes for a year, than letting some members of Congress pick some projects like replanting the grass at the Jefferson Memorial. And one of the things, Hugh, I want to bring out because I was a governor for ten and a half years, and when I hear the feds say well, we’ve got to prop up the states, there’s only a half truth in that. Some of the states’ problems are the result of federal policy like Medicaid that continue to change the rules and put more burdens. But one of the things that I am particularly against is the idea that the federal government is going to start repairing classrooms in local school districts. That is not a function of the federal government. That is the function of a local school district. At best, it’s a function of a state. But in no way should the federal government come in and start building local schools. Then you don’t have local schools. You have a national school system run by the feds. Our founding fathers would be aghast if they thought that the people of this generation had so abandoned the 10th Amendment, and really abandoned their sanity.

HH: Now Governor, Byron York is reporting for D.C. Examiner this afternoon that when it comes back out of conference, it’s going to get through the Senate tomorrow, going to go to conference. It’s going to come back, and obviously it’s going to have some staples on it and some additional checks, hot checks written off of the account. Do you think there’s any chance of getting Susan Collins, Olympia Snowe or Arlen Specter to change their minds? And are you working to do that?

MH: Well, I don’t know. I’ve about given up on them. I mean, I called them this morning on my radio commentary the not-so-Republicans, because here’s what ought to happen. The Republicans for once ought to stand on principle. And when Barack Obama says we need bipartisan, no he doesn’t. He’s got the votes to pass this. He wants bipartisanship for cover. This is a great opportunity for the Republicans to actually act like Republicans and say no thank you. You boys want to pass this stuff, knock yourselves out. We’re going to oppose it, and let’s just wait. In a year from now, if the economy is in as bad a shape as we think your actions will take it, then thank you, we’ll let the American people realize what a bunch of goofballs you were. If in fact it works, you get all the credit.

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HH: Governor Huckabee, I want to go back just for a moment. There’s a chance to stop this thing one more time if even one of the three defectors, Specter, Snowe or Collins turns around when it comes back. Are you willing to give them a call and try to talk them out of it, Governor? You’re one of the leaders of the party.

MH: I would be very…you know, I’ve contacted my two Senators, and one of them actually responded, the other one never even responded to me. And I would certainly, happily…in fact, on my website I have every Senator and Congressman’s contact information, because I tell people contact your Congressmen, contract your Senators. These guys are not my Senators, but I don’t mind contacting them just in the name of decent thought, because I am just totally appalled that Republicans would sign onto something that is not only hurtful to conservatism and to the Republican Party, but more importantly, this is hurtful to the country. I’ve been one, Hugh, that’s been saying if Barack Obama proposed things that I thought were good, I’d get behind him. I wouldn’t oppose him just because he’s a Democrat. But this is not smart stuff. This is not good for the American future.

HH: Now can you tell me as well about Blanche Lincoln? Do you think there’s any way to turn her around? She is your Senator.

MH: Well, I didn’t even hear from her. I’ve contacted her now twice, once on the Geithner nomination which I found appalling and disgusting, and then about this, and I have not even gotten so much as a response, which I’m disappointed. So I know maybe a couple of people that might run for her seat, and I’ve already contacted one of them who I know well who’s thinking about it, and I said I want to write the first check to your campaign.

HH: Want to tip that name to us, Governor?

MH: No, he’s not ready to announce, and I’m certainly not going to bust him out, yet. But he would be a great candidate if he says yes.

HH: Does he have military experience?

MH: He doesn’t have military experience, but neither does Blanche.

HH: Well, there’s someone out there I know who’s thinking about running that has military experience in Arkansas. Hey, Governor, while I’ve got you, I want to switch over to the fair tax.

MH: Sure.

HH: I’ve been reading a lot about the fair tax, because whenever I bring it up, the fair tax people just bang me because I’m not sold on it, yet. Is it your understanding, is your advocacy of the fair tax premised on the repeal of the 16th Amendment?

MH: Well, I think that would seal the deal for a lot of people. I’d like to say Congress wouldn’t be so stupid as to try to impose both an income tax and a consumption tax. But watching what they’re doing now, they might be that stupid. So certainly it would make sense to repeal the 16th Amendment if we had the fair tax. But frankly, Hugh, if we had the fair tax, we wouldn’t be needing this kind of economic stimulus where it’s just a spending grab bag.

HH: But do you think it’s Constitutional without an amendment, both the repeal of the 16th and a new amendment, to actually have a sales tax on state purchases of goods and services as the fair tax proposes?

MH: Well, it’s certainly Constitutional to have a sales tax. There’s no reason that we couldn’t have that. But I think the most important reason for the repeal of the 16th Amendment is to just give us a double sure check that Congress wouldn’t somewhere out in the future, they wouldn’t obviously try it immediately, but somewhere out in the future wouldn’t try to double-tax us.

HH: Well, I do understand the fair tax people as saying we need to repeal the 16th for that reason. But I also think you need authority for a federal sales tax to be applied to state purchases. I mean, if the State of Arkansas goes out and buys trailers to house people in, I don’t think the federal government has the Constitutional authority to tax that right now, do you, Governor?

MH: You know, I haven’t heard a Constitutional lawyer say that there was an issue about the fair tax. And so I’m not a lawyer. Thank goodness I’m not, sometimes, because I think they try to take the simplest things and make them complicated. But no question about one thing – the fair tax would transform our economy primarily rather than investing a bunch of borrowed taxpayer dollars, we would see U.S. capital that is currently parked off-shore, about $13 trillion of it, come back to the U.S. And that’s what we ought to be seeing.

HH: Governor, some of the other things I have discovered is that exports would not have a fair tax. So a Chevy that costs $50 thousand dollars in Michigan after it’s produced would cost 23% less in Mexico. Is that going to fly?

MH: Well, the point is it’s going to cost 23% less in the U.S., because you don’t have the embedded corporate tax. And it also means that for the first time, an American making something is going to be on a level playing field with someone in China making something as it relates to a tax burden. That’s one of the reasons that American manufacturers are going out of business. It’s not just cheap labor, because part of our problem is if something’s made in China, let’s take a chair, that chair does not get taxed when it’s leaving China, nor when it’s coming into the U.S. But if it’s built in North Carolina in one of the furniture companies over there, because of corporate tax, payroll tax and all of the hidden taxes that aren’t even transparent to the average American, that chair has built into it 22% embedded tax before it ever gets to the showroom floor. And that’s why the fair tax creates a transparent open tax system unlike the one we have now.

HH: But we don’t assess on exports, right? So whatever rolls off the line in Detroit is going to cost 23%, or 30%, however you calculate it, more in the United States than it’s going to cost in Mexico, because the embedded tax is going to be gone from both vehicles.

MH: It’ll be gone, sure.

HH: But…

MH: But it also means that the American goes to purchase that with his entire paycheck. He’s never had his paycheck before. No American’s ever, unless he’s self-employed, but even then he doesn’t get it because in fact, he’s paying even more money because of all the full load of Social Security that he’s having to pay.

HH: But it doesn’t…I’m just trying to get to understand it. It doesn’t apply to exports, though. So we export without the fair tax everything we make in America, will cost 30% less, or 23% less, depending on how you calculate it, south of the border or north of the border?

MH: Well, if they purchase it in the U.S., they would pay the fair tax on it.

HH: Right, but if they don’t, so a Chevy and that truck in Mexico…

MH: If they purchased it from Detroit, they purchased it in the U.S.

HH: No, I think, Governor, that the fair tax people say it doesn’t apply to exports. So you ship them overseas, it’s not on there.

MH: Well, I’m not sure how the transaction, where it’s considered taking place. I’d have to defer to one of the economists who designed it. What I do know is that the American manufacturing system would finally be able to start competing again, which we can’t do now. We would have capital brought in. And I know another thing. You wouldn’t have the current system where illegals, prostitutes, pimps and people in the underground don’t pay tax. And they’d start paying tax like the rest of us.

HH: And the illegals don’t get the prebate, right, Governor?

MH: Of course they don’t.

HH: Doesn’t that…

MH: It only goes to citizens.

HH: But then don’t prices go up by 23-30% immediately?

MH: No, they don’t. They do not go up more, because you have the embedded tax taken out. What you’re currently paying…

HH: Governor, hold on, we’ll come right back and I’ll give you a second to answer that.

MH: Okay.

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HH: Governor, as I understand it, most of the studies, even by the fair tax people, say prices are going to go up between 20-30% after the fair tax comes in, even after you back out the embedded taxes. It’s just too many things out there. It’s going to go up. But the prebate’s going to cover people. But we’re not going to send the prebate to illegals, so all the 12-20 million illegal aliens in America are going to face skyrocketing prices on food and shelter. And yet they’re not going to get the prebate to help them. Do you think that’s going to fly?

MH: Well, I don’t know why we would ever think that a person who has crossed this border and living here illegally should get a special tax benefit that should be going to American citizens. It’s not a matter of punishing people, it’s a matter of saying look, if you want to come here legally, you’re going to get the benefits. If you’re not here legally, you don’t get the benefits.

HH: What do you think happens when we’ve got 12-20 million illegals who are facing 20-30% price hikes without any help?

MH: You know, I think some of them will decide that maybe life on the other side of the border is better. And others will then accelerate their desire to become legal and get the proper documentation.

HH: Governor, you’re well known as an Evangelical. Do you think it’s Evangelically appropriate to do a 30% food price hike on people who are at the margin of society?

MH: Well, I totally disagree, Hugh, that it’s a 30% food hike, because first of all, the fair tax, in order to get to the level we’re at, we are now, it was at 23%. 22% is embedded. You really have somewhat of a wash. And when I hear people say that there’s going to be a 30% hike, it goes down to talking about whether the tax is considered after or before the purchase. But the one thing that I think everybody ought to be able to agree on, the current tax system is so complicated that the guy running the IRS now doesn’t even understand it. When Timothy Geithner can’t use Turbo Tax and understand how to pay his taxes, I think surely we can agree that the system we have is broken.

HH: Absolutely. It’s just that I don’t think the fair tax works, either, Governor. I think…I’d love to have you on for an hour about this. Maybe we can come back and just talk fair tax, but we are in agreement on the stimulus at least. On that, perhaps, we can part company in agreement?

MH: Well, we certainly are in agreement that the stimulus is a stupid idea, and hopefully, one day I’ll convince you that the fair tax is better than 67,000 pages of IRS tax code.